July 3 (Bloomberg) -- Apollo Global Management LLC-backed
Verso Paper Corp.’s bonds have soared on a sweetened debt
exchange offer that could give noteholders almost 20 percent of
the company’s equity after its merger with NewPage Holdings Inc.

Verso’s $396 million of 8.75 percent second-lien notes
jumped to 61.5 cents on the dollar today, from as low as 40.25
cents last week, according to Trace, the bond-price reporting
system of the Financial Industry Regulatory Authority. Holders
of 54 percent of the bonds, which may receive as much as 15
percent of the common stock in the combined business, have
agreed to the exchange offer, according to a statement yesterday
from Memphis, Tennessee-based Verso.

Apollo needs holders of at least 75 percent each of Verso’s
second-lien and subordinated bonds to agree to an exchange that
will reduce the company’s debt, allowing it to close a $1.4
billion deal to buy Miamisburg, Ohio-based NewPage and avert
bankruptcy. A previous offer was pulled earlier this year after
the second-lien bondholders demanded a 25 percent stake in the
combined businesses, compared with Apollo’s proposed 4 percent
of Verso alone.

The latest proposal to bondholders is a “good offer” and
a lot stronger than the earlier one from Verso, Rahul Gandhi, a
London-based analyst with CreditSights Inc. said in a phone
interview. They stand to receive almost 20 percent of the stock
post-merger, he said.

Stock Gains

Holders of Verso’s 11.375 percent senior subordinated notes
may receive as much as 4.774 percent of the combined company’s
common stock for 100 percent participation in Verso’s exchange
offer, according to the statement. The second-lien holders would
receive as much as 15 percent of the common shares for their
full participation.

The acquisition is expected to close by the end of the
year, pending antitrust clearance and the completion of the
exchange offers, Verso’s Chief Executive Officer and President
Dave Paterson, said in the statement.

Holders of the second-lien notes stand to receive as much
as 66.9 cents on the dollar under the latest exchange offer for
new notes, while those holding the subordinated bonds may
receive as much as 68.2 cents on the dollar, according to a
CreditSights research note today.

The second-lien notes traded for as little as 26 cents last
year and the subordinated bonds as low as 40 cents, according to
Trace.

Verso’s shares traded at $2.75 at 11:46 a.m. in New York,
up 20 percent from yesterday’s close.